The decision by the U.S. Federal Reserve to defer the rollback of its bond-buying program has provided the new governor of India’s central bank with a breather, but he’s not going to relax just yet.

The threat of a withdrawal of easy money in the U.S. signaled a possible rise in interest rates there and turned investor’s heads back towards American markets. This brought the rupee under severe pressure as investors pulled money out of India in favor of the U.S.

In his debut monetary policy review late last week, Raghuram Rajan, indicated he would use the reprieve to get India’s economic house in order by fixing the fundamentals – rising inflation and sluggish growth – in anticipation of Fed tapering down the line.

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India Real Time presents the key takeaways from the governor’s first major announcement.

On the Rupee:

The rupee fell drastically between May and August against the dollar. At one point last month the decline made it the worst performing among major currencies, touching an all-time low of 68.80 to a dollar on Aug. 28. It has regained some lost ground against the dollar after Mr. Rajan took over on Sept. 4, but the new governor has more work to do to restore it fully.

“As we build confidence in the economy, as we build confidence in the value of the rupee, the external value of the rupee will adjust appropriately,” Mr. Rajan said. “So our main focus is now let’s turn our attention to building confidence about the value of the rupee.”

On Inflation:

The RBI governor last week surprised the market by raising the repo rate, a key lending rate, by 0.25% to 7.50%, in a move designed to combat inflation.

“The current assessment is that in the absence of an appropriate policy response, wholesale price inflation will be higher than initially projected over the rest of the year,” Mr. Rajan said. “What is equally worrisome is that inflation at the retail level, measured by the consumer price index, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence. Although better prospects of a robust kharif [monsoon] harvest will lead to some moderation in CPI inflation, there is no room for complacency,” the governor added.

“Inflation is high and household financial saving is lower than desirable. As the inflationary consequences of exchange rate depreciation and hitherto suppressed inflation play out, they will offset some of the disinflationary effects of a better harvest and the negative output gap,” Mr. Rajan told the news conference Friday.

“Looking forward, we have to try and anchor expectations about inflation, if we are to both protect the value of the rupee and also give our own citizens a reasonable currency,” he added.

On Growth:

Mr. Rajan had to face a number of questions on whether his stance is only aimed at reducing inflation rather than jump starting growth. He however denied that this was the case.

“Any central bank does worry about growth and the emphasis does change depending on the economic situation. I think we are worried about both [inflation and growth,” Mr. Rajan said.

“Our intent is to signal a stand against inflation but I won’t overestimate the negative effect on growth,” he added.

“The calibrated withdrawal will provide a boost to growth, reduce the financing distortions that are emerging in the market, and reduce the strain on corporate and bank balance sheets,” the governor said.

On the Current Account Deficit:

India’s wide current account deficit, a result of the country’s heavy reliance on imports paid for in dollars, remains a matter of concern for analysts. The new governor is however assured that the gap can be controlled.

“We’re fairly confident that we can finance this year’s current account deficit without a substantial drawdown in (forex) reserves,” Mr. Rajan told reporters.

“Our sense is that enough measures have been put in place to contain the current account deficit to a number. We, jointly with the government, worked out a number of $70 billion and we think that should be financeable through the various measures announced by the government and the RBI,” Mr. Rajan said.

On U.S Fed Tapering:

Local stocks and the mood in the currency market turned buoyant on the news that the U.S. Federal Reserve would continue with its easy monetary policy. Mr. Rajan though struck a note of caution, warning that the proverbial can may just have been kicked further down the road by the decision.

“My sense is that market was quite prepared for a moderate tapering and what this has done is, in a sense, it has again created the possibility of uncertainty down the line as the markets have to again anticipate whether tapering will occur,” Mr. Rajan said.

“We need the stabilization regardless of what the U.S. Fed does. If we stabilize, we are better prepared for the tapering whenever it happens. But let us not lose the chance or warning that we had been given and celebrate too early. This is going to come back and what we need to do is put our house in order before it comes back,” the governor warned.

“Let us remember that the postponement of tapering is only that, a postponement. We must use this time to create a bullet proof national balance sheet and growth agenda, which creates confidence in citizens and investors alike,” he said.

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India Real Time offers analysis and insights into the broad range of developments in business, markets, the economy, politics, culture, sports, and entertainment that take place every single day in the world’s largest democracy. Regular posts from Wall Street Journal and Dow Jones Newswires reporters around the country provide a unique take on the main stories in the news, shed light on what else mattered and why, and give global readers a snapshot of what Indians have been talking about all week. You can contact the editors at indiarealtime(at)wsj(dot)com.